January 10, 2025
DHAKA – The National Board of Revenue (NBR) went ahead with its bid to hike value-added tax (VAT) and supplementary duty (SD) on nearly 100 goods and services despite widespread concern that the increased taxes will stoke inflation, straining the wallets of consumers further and slowing businesses.
Today, it issued the notification making the new rates of VAT and SD on items such as mobile phone usage, internet, tissue, grapes, apples, melons, readymade clothes, restaurants, sweets, LP gas, spectacles, and hotels effective.
From tomorrow, consumers will be required to pay up to 15 percent VAT on restaurants, biscuits and cakes, pickles and tomato sauce, clothes, tailoring shops and tailors, toilet tissue, napkins and towels, sweets, driving licenses, non-AC hotels, spectacles, sunglasses, motor workshops, and lubricant oil, up from as low as 5 percent.
The VAT rate on certain industrial items such as electric transformers, electric poles, and steel products, namely cold rolled coil, limestone, and dolomite, was also hiked to 15 percent from as low as 5 percent, according to the NBR notification.
People are also expected to pay more for medicine as the tax collector raised VAT on medicine at the trading stage. The NBR also increased the rate of VAT at the trading stage to 7.5 percent from 5 percent.
The cost of printing, cinema tickets, repair and servicing, and cleaning services will also rise because of a VAT hike to 15 percent from 10 percent.
Airfares will increase too, as excise duty on fares has gone up.
The costs of mobile phone and internet services, both widely used, will rise as well. The NBR increased SD on mobile phone use to 23 percent from 20 percent. Now, mobile phone users will face over 42.45 percent in SD, VAT, and surcharge, up from 39 percent at present.
Broadband internet users face a 10 percent SD, which is likely to push up internet bills.
“This will have a detrimental impact. We are uncertain how we will survive with such extreme measures. The quality of ISP services will deteriorate,” said Emdadul Hoque, president of the Internet Service Provider Association of Bangladesh.
“We urge the government to reconsider such actions, as they will not only harm businesses but also undermine services and increase costs for customers.”
SM Nazer Hossain, vice president of the Consumers Association of Bangladesh, said the hike in VAT and tax in the middle of the year is ‘unprecedented.’
“There has never been a move like this before. Although the interim government claims that the increased VAT and tax will affect less-essential items, it will impact consumers,” he said.
“People are already grappling with high inflation, and this decision will only add to their burden,” he added, saying, “If the government aims to increase revenue, it should prioritize curbing tax evasion.”
“Addressing tax evasion would eliminate the need for such measures and prevent further public suffering,” he said.
The NBR hiked indirect taxes at a time when overall revenue collection fell 2.62 percent in the July-November period, increasing pressure on the government to borrow from domestic and foreign sources.
The VAT increase also aligns with the recommendations of the International Monetary Fund (IMF) as part of a $4.7 billion loan it approved for Bangladesh in January 2023.